Brazil: Labor Reforms, Shift in Employee-Employer Relationships

The labor reforms proposed by the Brazilian federal government was sanctioned by President Michel Temer back in July 2017. The changes were put into effect in November last year, providing a new outlook on employee/employer relations.

Back at the end of 2017, there were major reforms made to Brazil’s labor laws. The pillar of these reforms was modernization that was used to update the Consolidation of Labor Laws (Consolidação das Leis do Trabalho).

The main purpose of these amendments was to establish mutually agreed upon arrangements between employers and employees that would shift and strengthen their relationship. It was also expected that the new laws would shed light on and eradicate informal contracts being signed in the shadows so as to better protect both employers and employees.

All in all, their main purpose was to give rise to a modernized outlook and solutions to problems that were stifling the progression of the employee-employer relationship in Brazil.

Ripple Effect One Year Later

To date, Brazil’s 2017 labor reform laws are still making headway and producing results that favor both employers and employees. More so, companies continue to give it high praise for its efficiency, especially in terms of the changes made to allow intermittent and flexible working hours, and direct channels of communication between employer and employees for the negotiation of employee termination.

What these reforms did for the employee and employer relationship was to create new ways and different avenues to deal with the same old problems. The element of modernization used to coin the new reforms made it so that Brazil was not too stuck in its ways such that it stifled innovation and development within the labor sector.

According to the ministry of labor, the following three (3) changes to labor laws spiked significant improvement in multiple organizations across sectors. This is because they gave way to direct communication that created a platform for both the employees’ and employers’ needs and wants to be heard.

1. Negotiated Termination

The labor law changes now allow employees to negotiate termination with their employers. Previously, employees could only receive severance pay from Brazil’s employee dismissal fund if they had been fired by their employers. This left employees pleading with their employers to fire them, and more often than not, employees would decline to do so paying them their severance fee.

Now thanks to the reform, workers who comply with a negotiated termination can get up to 80 percent of what they are owed from their severance entitlement. In light of the changes, negotiated termination is now legalized and employers who fail to comply will have to pay a 20 percent fine which is half of the previous fine attained for wrongful termination.

According to a study conducted by the Inter-Union Department of Statistics and Studies (DIEESE), a respected union-sponsored think tank, 82,982 termination agreements have been negotiated between management and employees since last November, and the number negotiated in June was double that of December.

2. Intermittent Work

One of the most controversial laws created and passed was that of intermittent working. This law gave companies permission to hire workers who worked without any fixed hours. Such working contracts require employers to set an hourly wage and call in the workers as and when they are needed.

According to the Brazilian labor ministry, close to a quarter of the business in the economic sectors took advantage of and implemented the intermittent working schedule during the second quarter. On top of this, when nationwide payroll jobs fell, intermittent working grew significantly. Companies see this reform as an option that focuses on moments of peak work which helps them avoid overworking their teams, thereby saving on overtime costs. Essentially, this is because the facilitation of temporary hiring enables employers to adjust their manpower when necessary and more rapidly, on a ‘just in time’ basis.

Analysts believe the intermittent-work policy has been successful because it was introduced as the economy was emerging from the 2014-2017 recession. Critics of intermittent work complain that it allows companies to replace full-time employees with on-call workers, but the Labor Ministry has seen no evidence of this, according to a ministry spokesman.

3. Flexible Working Hours

The new flexible working hours law allows unions and employers to negotiate flexible working hours of close to 12 hours in a day without any overtime as long as the weekly and monthly clocked hours remains at 44 and 220 hours respectively.

According to the association that represents retailers in Brazil’s capital, Sao Paulo, ever since the labor reforms were set in place, two of Brazil’s largest supermarket chains have finalized flexible working hour agreements with their employees.

Initially, the unions were the ones who would present labor demands. Now, it is the companies who do so. This new working hours model helps employers meet their Brazilian consumer’s demands whilst saving on resources and expanding job opportunities.

Reforms that worked for all

The labor reforms have provided access to jobs and benefits to a large number of professionals who would otherwise have been idle and jobless. However, it is good to point out that that the fruition of these laws required adjustments from both employees and employers.

These success stories were only made possible by the fact that companies were able to efficiently manage and dilute costs whilst retaining their employees and being open to different types of employment categories such as temporary workers. For instance, this was actualized when employers opted to go with reducing the number of hours worked instead of rushing to lay off employees during harsh economic times. This way, companies were able to retain good professionals on the job.